There has been some ugly data out of China of late. Looking at the Shanghai Composite Index, we know the main Chinese market has been in a downtrend since August 2009, after previously snapping back hard from its infamous run-up and crash from 2007-2008.
At some point, you would think China is a great buy. Observing the updated weekly chart, below, the inverse head and shoulders bottoming thesis is apparent and would probably need to see price clearing 2,480 to trigger an upside breakout.
However, last week’s price action featured heavy and steady selling. As a group, emerging markets remain under pressure and probably should bounce soon, even if it is only a respite from the downtrend. The best chance bulls have for China would be to see strong buyers present themselves with sizable buy volume on that 50-period weekly moving average, at 2,193 and still declining.
Below there, and any bullish bottoming pattern is likely negated, opening the floodgates to a retest of the 2008 crash lows.
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Just me chess – but I’ve got every thought in mind that China ( and the lot ) take major hits late 2013 and into 2014.
The aussie dollar has entered “vortex to no man’s land” with alot of room to fall…and fall..and fall.
You gotta know something is up when USD waterfalls like it has – and AUD is EVEN WEAKER.
Risk sneaking out the back door here.
I agree. The price action last Thursday and Friday was particularly weak on the Shanghai. AUD weakness might be the real story here.
When USD tanks and AUD goes even lower – that is not good.
Normally such a downward drop in USD would have AUD/USD and NZD/USD flying – with equities and “risk on”.
This is what I’m getting at via currencies. It’s clear to me risk is taken the back door here – in a macro global fashion, and U.S equities have been the last show in town.
That AUD/JPY cross is definitely on my radar.
I’m trading a solid bounce here over the next 3 – 4 days maybe…and then further JPY strength and further risk aversion. AUD/JPY could easily drop -1000 pips and still maintain an upward channel / trend on the weekly.
should be an exciting week!